Dancing with Snakes: Who Benefit from Egypt’s Twin Coal for Gas Paradox?

The significance of East Mediterranean energy region has been continuously escalating in association of key European Union countries active in securing its energy security and the U.S. active in sustaining strong grip in the Middle East. Many energy observers and industry researchers propose that global energy players are fiercely competing for a big slice of the East Med new or expected to be energy discoveries and productions capacity with focus on natural gas.

Careful empirical and content analysis suggest that such competition to control the energy sources of the region goes beyond responsible and inclusive business or economic competition. It is meant to reshaping the Euro Med and Middle East in a way that gives better and justified direct un-interrupted access to obtain the cleanest available fossil energy, gas from East Med countries, and swap it for the worst and most polluting fuel, coal, to be introduced in the largest country in the region, Egypt. At a time that Egypt has proven and internationally recognized good gas reserves that can be utilised; while coal is a polluting energy source that will be imported!

This article introduces and attempts to explain the recent Egyptian twin paradox of gas-coal and its adverse impact in shaping domestic and regional market structures, infrastructure and even super-structures in countries of the Euro-Med especially Cyprus. Why coal is strongly marketed at this time?

This is based on readings from four relatively recent documents and events unveiling the question of Why Egypt is compelled to move to energy insecurity situation depending on imported Coal which is currently promoted to solve the few domestic and international industries in the sector of cement employing only around 5000 people (based on Egypt’s Ministry of Industry sources) with no additional job creation; out of 500,000 per year looking for jobs?

I. Gulf Oil and Gas "Egypt Gas Puzzle" series and the renowned article of March 13, 2014 attempt to understand the unwarranted decision of Egypt to invest $16 billion dollars in today prices in gas export infrastructure LNG facilities and pipelines. This can only be justified only if expected domestic demand is fulfilled and sizable surplus is available for long term exports. The usual statistical tolerance of error in estimating surplus in demand and supply is around 10-15%. In Egypt case it is 100% error in estimating future availability that leaves two major LNG and pipeline investment idle. The true puzzle that the article brings about is:

Current Egyptian Minister of Petroleum announced on several occasions, in media, and in a meeting with Canadian-Egyptian business Chamber early 2014 that Egypt has no gas to meet its domestic consumption let alone exporting. This is meant to diversify attention to coal instead of gas. While he points out to US Energy Information Administration (EIA) as a reliable reference that Egypt has proven reserves of about 70 trillion cubic feet and it only lacks investments and funding to extract this amount. Puzzling as it is Minister of Petroleum was (according to the electronic portal of Egypt’s Ministry of Petroleum) the key official in 2000-2009 in developing Egypt gas strategy and later soliciting the export infrastructure as a head of Egypt Gas Holding Company; and currently as the Minister in Charge. Equally perplexing, the claims of no gas availability comes at a time British Petroleum (BP) celebrates on its website the largest top 10 Gas discoveries in the world to take place in Egypt in late 2013 with the name Salamat gas field owned (according to BP site) 100 present by BG. Is Egypt really not part of the equation?

This can be the untold story and motive behind the passionate campaign led by both Minister of Industry and Minister of Petroleum in favour of getting very cheap energy coal to off-set quickly the need to export more gas through Union Fenosa LNG in Damietta and The Idku Gas de France in Port Said LNG. Shifting a chunk percentage of 20 percent of domestic gas consumption to feed in exports and close the once unjustified investments in export infrastructure.

The introduction of coal into Egypt serves three main outcomes:

1. Egypt will continue as energy deprived country of utilizing its own gas and continue dependence on imported source which coal.
   
   
2. Undermining and hampering any attempt for energy rapprochement on gas between Egypt and Cyprus, which has similar compelling situation to build Vassilikos LNG plant and using its domestic treasure. Coal is meant as lucrative cheap source.
   
   
3. The coal-gas paradox and debate will consume much of the civil and government focus on real action in developing domestic clean energy such as gas and renewable investments such as solar and wind with huge potential of using waste as source of energy.

II. The article "Is coal America’s next toxic Export?" On Fortune magazine, March 17, 2014 could not be timely better to reflect on the international factors directly affecting the domestic energy mix in the Euro Med region especially promoted in Egypt. That article asks if the U.S., with the largest coal reserves in the world, needs to actively develop export channels to compensate the slow-down in world consumption of coal and inevitably sluggish business in the U.S. specifically to developing countries. This will fuel the developing countries’ growing energy demand but increase the carbon emissions of those countries dramatically. Bearing in mind that Egypt still considered very low Carbon emitter by international standards. It is no coincidence that strong lobby forming in Egypt, led by cement companies with the main 22 companies are multinational pushing for Coal use refusing any other energy source. In this pursuit, the two idle LNGs are owned by Gas de France and Union Fenosa of Spain to push massive use of coal fired industries with obvious interest in resuming their gas operation in halt. The introduction of coal will certainly allow the diversion of sizable amount of domestic use into gas exports.

III. "Reset Middle East" by Stephen Kinzer came out 2010, shortly before the so called Arab Spring paving the road for U.S. to consider innovative shape of the new Middle East in which four countries emerge: Israel, Turkey, Saudi Arabia and Iran. The book builds on historical American perspective of the region and vigorously pushing for what appears to be not politics but energy politics in which surprisingly Egypt and Iraq are not pivots. Careful content analysis of the region indicates high correlation with the systematic domestic process in Egypt outlined in document I & II. Countries like Egypt and Iraq can be perceived as good source of clean energy security to international players with their domestic energy and resources compromised.

IV. The Euro Med Exploration Conference in October 2013 in Cyprus, and many energy conferences in the region re-defines the seemingly scattered picture of the region (spelled into documents I., II. and III.) in relation to energy dimension. All of these conferences between October 2013 - present echo one model the U.S./Israel/Turkish model as a Cyprus solution and bail out of financial challenges. Is for Cyprus or other energy-hungry players, as indicated on Thursday March 20, 2014 interview with the U.S. Ambassador in Cyprus by Associated Press. Elaboration deserves separate article.

It is worth consideration to ask and continue investigating the puzzle raised by Gulf Oil and Gas article and explore who is behind the coal-gas paradox not in Egypt but in the region? Cyprus story can be next.

Contributed to Gulfoilandgas.com by
Tarek El-Baz
Independent Energy and Development Advisor

The author is a Gulfoilandgas.com contributor. The opinions expressed are those of the writer.

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